Tradeable Lows, Nvidia’s Data Center Finance Deal, Surprise Comebacks for Schwab and Expedia

14:17Downtown Josh Brown:And now it's completely reversed. Another stock that's going to take out its 50-day. And I understand it's not a nice-looking chart, but is it a tradeable low? Yes.

14:28Michael Batnick:And also, look where interest rates are. They're at their multi-year highs. Interest rates can't hurt the stock anymore. That's in it. It's all in the price. I think this is going higher.

14:38Downtown Josh Brown:Okay. I think I'm with you on that. This is the type of stock that I would pull the trigger on. I want to give it another minute, but I think it goes back to 400. I don't know what happens from there, but I'll take 50 points in a$300 stock.

14:53Michael Batnick:Yeah. All right. Next.

14:54Downtown Josh Brown:uh that's all i got but yeah which is your favorite of the six that i showed you all right so we did i think it's uber that's crazy or meta no i'm not not meta either uber or home depot uber or home depot okay and definitely not nike but it's but it's at it's at a crashing 200

15:14Michael Batnick:day i know no it's been a lid on the stock so we're not talking about names we're not talking

15:19Downtown Josh Brown:I'm at best stocks in the market here, like specifically, which I'm at treatable lows in very big stocks that have not been good stocks this year.

15:27Michael Batnick:Yeah. Okay. Actually, they've been bad stocks for many, many years. All right. Let's talk about consumer stocks. Josh, a week or two ago, you went on a diatribe about if you had a legal pad and you wrote down like 10 things that you would want to see in a bull market, it's all happening. There was one One thing missing that I want to bring to the party, consumer discretionary stocks. We've spoken over the past about how sometimes consumer discretionary stocks can be really noisy and not necessarily be a read on the consumer. We've spoken about Dollar General and Chipotle and Sweet Greens, and they might just be idiosyncratic to the particular company.

16:07Michael Batnick:And the earnings report or the stock might say nothing about the health of the consumer. It just might be a specific risk to the stock or the sector that has nothing to do with anything. I think this particular ETF tells you a lot about the consumer. This is a small cap consumer discretionary. This chart comes from Alfonso de Pablos, and he is showing this chart is hitting a new all-time high. Now, why do I say that this actually is a read on the consumer and the other stocks we've discussed aren't? Here's why. Look what's in this basket. You've got 21 % of the portfolio in specialty retail. You've got another 21 % in hotels, restaurants, and leisure.

16:47Michael Batnick:Then you've got 70 % in household durables, Mohawk, we mentioned last week. You've got 11 % in diversified consumer services, automobile components, textiles, apparel, and luxury goods, distributors, broadline retail, leisure products, automobiles. I know it's a small piece, but this is a broad basket, a broad, broad basket of consumer stocks. And you want that to participate in a bull market and they're at all-time highs. Small caps.

17:16Downtown Josh Brown:I mean, I'm looking at the charts solo, not comparing it to anything. I mean, it barely trades any volume, so the candles are crazy. Yeah, don't look at that. There's a lot of gaps.

17:28Michael Batnick:Look at the line. It doesn't matter. The gaps don't matter. This is a thinly traded stock.

17:32Downtown Josh Brown:I'm looking at the line. Or ETF, I should say. I didn't even know this existed. Brinker, CarMax, Etsy, Victoria's Secret, mohawk lifetime pool corp front door caesars these are consumer these are consumer stocks like these are the types of stocks i don't want to own any of them individually you know like these are the types of stocks you get you get fucked up in you know what i mean

17:58Michael Batnick:but as a basket right right confirming yeah as a as a theme i like i like what you're showing me

18:03Downtown Josh Brown:I'm saying I prefer the ETF than going long Boot Barn or Cheesecake Factory. Like these are the types of stocks that you blow yourself up in.

18:14Michael Batnick:Holy shit. Because they surprise you. Dude, look at Cheesecake Factory. What in the world is happening?

18:21Downtown Josh Brown:What is happening to Cheesecake Factory?

18:23Michael Batnick:Are they in AI? AI Cheesecake? Look at the stock.

18:28Downtown Josh Brown:When was the last time you ate at a Cheesecake Factory?

18:31Michael Batnick:30 years. Guys, the ticker is cake. This is unbelievable. It just ran from –

18:36Downtown Josh Brown:The menu is wild. There's literally – It's three feet long. It's 80 pages and every dish you've ever eaten is in there and none of them done particularly well. No idea what's happening here.

18:49Michael Batnick:Chart went from$65 to$1.15 in a couple of months. Huh.

18:53Downtown Josh Brown:Interesting. So much for the GLP-1 fiat. What else they own? They own – oh, they own North Italia? Do they own Rainforest Cafe? No, I think that was – I think Tillman Fertitta owned that at one point. Okay.

19:09Michael Batnick:Remember that in the source back in the day? That was like – that made a huge splash on the scene. That was so nice.

19:14Downtown Josh Brown:That was a slap with the animatronic ape at the front.

19:17Michael Batnick:That was so late 90s. So late 90s.

19:20Downtown Josh Brown:Theme restaurants in the late 90s had like a – had a minute. Planet Hollywood, huge. Dude, they opened the – they opened the supermodel cafe. Like the – I forget what it was called. It was a fashion-themed, and it was all 90-pound women opening a restaurant. I can't believe it didn't work. I don't think anyone ever tasted the food that was part of this group. It was like Naomi Campbell and maybe Elle McPherson. I'm making this up, but all the 90s supermodels opened the supermodel cafe.

19:53Downtown Josh Brown:They're mostly gone. The Yankees one is still there, though, on 7th Avenue in the 50s. Have you ever been there? Mm-mm. The New York Yankees steakhouse. Go in the basement. Go in the basement. It's insane. They have a, it's called the vault. The walls are lined with the actual framed contract of the most famous Yankees ever. And Yogi Berra's contract is on the wall. His dad signed it. Do you know why? Because he was 16 when the Yankees signed him. He couldn't legally sign his own contract. No kidding. Did not know that. It's a wild team. All right. Anyway, I don't know how we got there. So you like the fact that this group of stocks is – I mean, obviously, who wouldn't like that?

20:42Downtown Josh Brown:I don't like it. I love it. I love it too. Is this a – put the chart back. Is that a breakout? Yeah. It's a relative. I mean – Yeah.

20:49Michael Batnick:It's going.

20:50Downtown Josh Brown:Yeah. Son of a bitch.

20:53Michael Batnick:What the hell is this cheesecake? I'm going to find out. I'll answer next week. All right. Let's get going.

20:55Downtown Josh Brown:I'm going to play a video clip for you guys. Settle in. won't take long. I want you to see this.

21:01Michael Batnick:We have this big breaking news this afternoon about what's been happening when it comes to the AI infrastructure bill. This is news that was first out a little earlier today, but we can confirm that news at this point. NVIDIA working with some of the biggest names on Wall Street to secure financing for its customers. Joining right now with us to talk about all of this is Jensen Wong. He, of course, is NVIDIA's founder and CEO. David Solomon is the CEO of Goldman Sachs. Larry Fink is BlackRock's CEO. John Gray is Blackstone's president. Vladimir Zlazak is global head of digital infrastructure at KKR.

21:36Michael Batnick:Jim Zelter is Apollo's president. And Bruce Flatt is Brookfield's CEO. And gentlemen, welcome to all of you today. It's kind of amazing to get this group around the table. And Larry, to have you joining us remotely, too. But we have to start with this news. Jensen, this is a big deal, and it's a big number. half a trillion dollars more than that in terms of financing. We know this is an expensive build, but tell us a little bit about how this came together and what exactly it is. Well, first of all, I want to thank all of my partners for joining me here today. I think this is the first time this has ever happened before, and I can't imagine a more important time to do it.

22:10Michael Batnick:We're announcing six partnerships today. These partnerships are going to pull together independent long-term capital to fund and support ai infrastructure build out holy shit what a scene

22:25Downtown Josh Brown:holy cow i miss that wow it's like the justice league i mean if you're if you're like a wall street person that's i mean superman batman wonder woman green lantern holy shit all in the same place other than larry fink who big-timed them um i'm guessing he was on vacation i'm sure he would I'd love to have been there. But like, man, you got D-Sol sitting there with Jensen. And then they got, who was there? Blackstone, BlackRock, Apollo. KKR, Brookfield. KKR. Who? Brookfield. Brookfield property, right. Okay. I'm just looking at the chat. This is the type of thing that tells you it's the top. I mean, you could forgive somebody for saying that.

23:12Downtown Josh Brown:And it might be. I mean, I'll tell you in a year.

23:14Michael Batnick:I've heard way dumber top calls than that. Yeah, for sure.

23:17Downtown Josh Brown:I mean, that's, yeah, I mean, sort of. I mean, no blue owl. That's funny.

23:26Downtown Josh Brown:Who else? I watched the whole thing. Super bullish for AI infrastructure. So that's what I think. And I'll tell you guys why I think it's actually bullish and not a top. Somebody's saying they're not putting their own money in. Well, yeah. Yeah, that's all the people's money. They sort of are. They're raising money, but also they're putting their reputation in, which is as valuable as money. So I don't know if I agree with that. All right. What was your reaction? Did you watch? I watched the whole thing. It was 35 minutes.

23:53Michael Batnick:No, I want to hear from you.

23:54Downtown Josh Brown:Okay. So to me, this is my take. Jensen just checkmated the entire AI infrastructure story. He just effectively with six partnerships but bringing them all together. Basically, compute is fungible. So it doesn't matter if somebody is going to run this LLM, that LLM, or if it's Gemini or if it's Anthropoc. It doesn't matter. Compute is compute. It is the scarce resource. We do not have enough of it. And nobody that knows anything about AI thinks we have enough of it. The only real debate was about the circular financing. Is it healthy for NVIDIA to give a startup Neocloud$5 billion, then that Neocloud spends four of that$5 billion on NVIDIA chips and NVIDIA books it as revenue?

24:50Downtown Josh Brown:Is that healthy? I think Jensen says to his CFO and maybe some other people at the firm, maybe some big investors, like, why is my stock price not moving for a year? Why is my multiple shrinking when my earnings are growing 80 % every quarter? What's going on? And they probably said, this is the thing that's going around on Wall Street. They're worried that you're running the Cisco playbook. Cisco, for people that weren't around back then, was doing circular financing deals, which was not illegal, was not a dirty word. But basically making sure that there were enough buyers beyond just AT &T and Verizon.

25:33Downtown Josh Brown:There were all these competitive local exchange carriers building telecom assets, and Cisco wanted to be the one to sell into them so they would help finance these transactions. And of course, when the market blew up and the financing disappeared, all the earnings blew up. Everybody understands that. This sort of eliminates that from the conversation. these are companies that are capable of raising a combined trillion dollars with a year's notice they will they'll raise 500 billion they'll figure out how to pay interest rates on the usage of this compute um it'll sort of look like mortgage finance or other asset-backed securities the asset here is the factory they're not like reinventing the wheel they're just treating compute the way electricity is treated or the way we treat cell phone towers or the way we treat cold storage for refrigerated goods that have to move to supermarkets.

26:31Downtown Josh Brown:Like it's not the craziest thing on earth. So look at this like these are basically factories where we do data in and the financing should pay an interest rate. And I bet we can line up investors who want to get a piece of that. So my thought was like, this is really smart. We put an end to the circular financing conversation. And now, you know, the bearers will pivot to it's a private credit bubble, but it's a lot more money and a lot more people funding this. It's not just Amazon, Oracle, Alphabet and Meta. Now, we're going to have effectively like 20 million investors helping to finance this CapEx build-out.

27:13Downtown Josh Brown:So I think it's a genius. And the key thing that Jensen gets is NVIDIA chips in every one of these data centers, as far as the eye can see. So I think it's a checkmate for him. I think it's brilliant on the part of the Wall Street guys because they always need to come up with new products to sell to wealthy people. And I think it puts the bears on their heels. Like, all right, I guess we can't say it's for companies financing their own revenue anymore. So that's my take. Private credit is not so hot

27:49Michael Batnick:when 25 to 30 % of that asset class is software names. And if you like the floating rate nature of this without the duration, what's more attractive than the good stuff? This is the blue magic.

28:01Downtown Josh Brown:Yeah, the other thing that this does politically, and this is why you don't fuck with these guys they're so much smarter and so far ahead of people mouthing off on Twitter one of the fundamental potential negatives on all of the data center investments they've already made is that regular people are pissed they're screaming, they're demonstrating they're voting they're showing up at town halls deeply unpopular it's extremely unpopular because you know what it looks like from the outside looking in let me get this straight we had like this clearing in the forest and basically like Mark Zuckerberg is going to put cancer causing batteries in the midst of where we live or they're going to take our water or they're going to jack up our electricity bill and none of that stuff is true or some of it is true and some of it's distorted, but it doesn't matter.

29:05Downtown Josh Brown:The people hate it. Now, if you flood their retirement accounts with exposure to data center investments, you blunt the edge of some of that protest. Of course, what? People are going to protest their own investments?

29:21Michael Batnick:Yeah, I don't buy that. What part of it don't you buy? I think that's a stretch. I don't think the people that are protesting give a shit about exposure to this private asset class.

29:30Downtown Josh Brown:Not all of the people, But some of the people, if all of a sudden they say, oh, we don't own the AI. We don't own the compute. You do. We all do. Everyone in America is collecting a rent from all this supercomputing. This is not just Google and Meta. It's you. You own it. I get it.

29:55Michael Batnick:I understand. I think it's a stretch. this this chart from KOTU is wild just to frame the amount of spending because it's such a big dollar.

30:04Downtown Josh Brown:People are so mad at what I'm saying.

30:06Michael Batnick:Yeah that doesn't hold muster. That's okay you tried. Throw this chart from KOTU. So this is hyperscaler capex compared to the defense discretionary budget and yeah 733 billion dollars is an incomprehensible amount of money but when you reframe it next to the defense budget. It's unbelievable, dude. It's really wild.

30:28Downtown Josh Brown:Yeah, and I'm going to tell you something. And I'm going to tell you something. They're going forward. They're not going to raise$500 billion and not build it. Now, I do see a lot of our friends in the chat saying it's just a memorandum of understanding. Anybody could sign a memorandum. Yeah, that's true. We'll see. Let's see the money get raised. let's see the structure of products that they're going to create yeah we have no idea what this is that money yeah it's true it's true it's it that's right it's an mou i could sign an mou right now uh and and not be bound by it but you have to think that they've been sitting in a room coming up with ideas for how do we productize this how do we get regular people um access to it blah blah blah like oh it's gonna happen to do they're gonna do it yeah it's gonna happen you want to bet against larry fink have fun not me find me some stuff larry fink has tried that he hasn't been able to do we're against uh jensen okay i wish you i wish you luck so josh for our

31:35Michael Batnick:next topic um i should have done the inverse of this so what we're looking at here let me set the story there are several stocks that are at or near all-time highs that got the kicked out of them in the spring because they were in the crosshairs of ai anything ai related schwab of course we'll get into all this these stocks just got kneecapped and some of them recovered and are at or near all-time highs so i have those charts i didn't bring the stocks that have not recovered a lot of the software names even though they've been significantly we're cherry picking yeah we're

32:06Downtown Josh Brown:Cherry picking.

32:07Michael Batnick:Yeah, so like S &P has not recovered, nor Moody's. A lot of the exchanges are not doing well. A lot of the software names have bounced but are still nowhere near their highs. All right, so let's look at the stocks that are actually not going to be blown to smithereens by AI. So chart on, please.

32:25Downtown Josh Brown:Stocks that people have changed their minds on.

32:27Michael Batnick:So Snowflake fell 56%. Yeah. And then rallied 178%. Josh, you're all over this great call here. I bought it.

32:38Downtown Josh Brown:I'm still holding it. And I bought it recently. I'm not up that much. But I'm up nicely. No, I know.

32:43Michael Batnick:You bought the breakout.

32:45Downtown Josh Brown:I bought the breakout. And I'm not a seller. I have a stop in. But I'm not taking that profit because I think Snowflake is going to be a very important part of the next five years of data center and AI. So I'm sticking around.

33:02Michael Batnick:All right. Schwab, probably one of the most predictable bounces here. You traded this. So predictable that I bought it and sold it. Wish I had as much conviction as Josh does. But Schwab fell 20 % on the altruist news, which again, or the hazel news, which we said literally makes no sense when it's nothing to do with the other, since has bounced 26 % to no all-time highs. Expedia and Booking. I think these were the ones where it's like, oh, why do you need this bullshit? You could just code this and these sites are going to go away.

33:34Downtown Josh Brown:Nope. We did Expedia on the air today. Sean and I wrote this up for best stocks in the market last September. It got knocked off the list in January or February when they started to beat up these stocks. It got killed. It got absolutely killed. But now it's back on the list and it broke out. It's a fresh breakout. There is insane momentum for everything travel. I didn't buy this one. I was choosing between this, Delta, and Marriott. I bought the other two. I didn't buy Expedia. I probably should have bought all three.

34:07Michael Batnick:Expedia is going way higher. I don't know if I'm an idiot, but it's going higher.

34:11Downtown Josh Brown:Next. Travel is – the point is like the popularity of travel amongst businesses and consumers right now supersedes any sort of disruption risk. Yes. Yes. Very good point.

34:22Michael Batnick:Very good point. All right. Let's – what else we got? Oh, and then Palo Alto and CrowdStrike. I mean, Josh, you laughed at this at the time.

34:30Downtown Josh Brown:We laughed heartily over and over and over again when they were selling off the cybersecurity stocks because of AI disruption risk. Just the concept of people vibe coding their own patches for software security, it's like a literal – it's a joke that tells itself. I did want to say I think CrowdStrike might be one of my biggest winners of all time in a very short period it came public in the summer of 2019 I bought it in 2020 during the pandemic I've held it ever since it is up 92 % year to date so it might be a 10 banger

35:09Michael Batnick:for you or close to it

35:11Downtown Josh Brown:I honestly think it's like one of the biggest winners I've ever had it's 5 year compounding at 29 % a year, which is, it's since inception, since its IPO, 1 ,450%. Like they don't make these on trees. Dude, this stock got creamed in the 2022 sell-off.

35:37Michael Batnick:It went from$75 to freaking 22. And you held on the whole way.

35:45Downtown Josh Brown:Yeah, I'll never sell it. So now 10 times higher. The thing is, I've been through huge drawdowns with it. But I just like I got to know George Kurtz. We've had him here on the show before. I'm not like in contact with him all the time. Every once in a while, we text each other about like random stuff. We're not, you know, I don't really have any questions. I guess as a shareholder, I just assume they know what they're doing. He just continues to win. It's like unbelievable the extent to which he's made the case to the public. that CrowdStrike will be the most trusted name in the AI age, just like it became the most trusted name before there was AI.

36:25Downtown Josh Brown:They are the platform of choice for the largest companies and organizations in the world. And I can't imagine the spend going down. What board of directors would approve a CEO coming to the table and saying, maybe let's spend less on cybersecurity? What are you, fucking crazy? Like, what? All right, fine. In the minutes, let's make sure we all know that Bob said that. That was Bob's idea.

36:54Michael Batnick:If I had to submit to you one group of stocks that will join this list of why did we sell those stocks that will hit an all-time high, I would say Moody's and S &P. The rating agencies are not susceptible to a chatbot. No way.

37:11Downtown Josh Brown:You know who we were talking about that told us that? Ron Barron? Ron Barron was talking about MSCI, same category.

37:18Michael Batnick:Okay, same thing, same thing.

37:19Downtown Josh Brown:You know what it is? It's not that AI can't come up with an index. It's that there is a standardization and a trust that's more important than technology. It's like that's the gold standard of the – people don't want an AI-created benchmark or ratings on bonds or research on allocation.

37:44Michael Batnick:There's regulations here. You can't just replace it. These bonds need to be raided.

37:49Downtown Josh Brown:I think that's right. I think that's right. I like it. And they own the data that, quite frankly, the LLM is going to have to pay for in order to use. They have the fuel that turns into knowledge when an LLM absorbs it.

38:09Michael Batnick:So I do wonder. I do wonder. So the New York Times is saying to OpenAI and Anthropic, hey, buddies, you got to pay us if you want to train on our data. I wonder if some of these data providers will go the route of Alex Karp, will heed his advice and say, I don't care what you're paying us. You're not touching our data. Sorry, buddy. You're out. You're not getting it. If FactSet says to OpenAI. That's dangerous, though.

38:36Downtown Josh Brown:Because a competitor will take the money. And so right now.

38:40Michael Batnick:What if they all band together? Fax at Bloomberg, all these companies say, no, we're not doing it.

38:44Downtown Josh Brown:The New York Times lawsuit against, I think it's Anthropic. It might be OpenAI and I'm wrong, but I don't think I'm wrong. That's going to be a really important precedent-setting, groundbreaking outcome. Whatever happens there, whether it's a settlement or it goes to a trial, because as I've said here on this show, I had a front row seat for the first round of this. This whole information wants to be free. Google was able to build a$5 trillion company on free everything because they convinced book publishers, magazines, newspapers, data providers. No, no, no. We're just indexing it. They were a wolf in sheep's clothing.

39:25Downtown Josh Brown:Yes, they indexed it, and then they ran ads next to it. And then they became the go-to doorway to all of this information and were able to muscle everybody else's businesses out of the way. That is not going to happen. this time. It's too fresh in everyone's minds and memory. And I actually think the courts will rule with the providers of this intellectual property, which is the data and the articles. I don't think the courts are going to be like, yeah, go screw them all over again. It worked out so great the first time. It's not going to happen. It's not going to happen. So I think a lot of these companies that look like they were about to get disrupted to zero, You forget the LLMs can't train on imaginary data.

40:12Downtown Josh Brown:They do need to start with something somewhere. And they're going to have to pay for it. So I like that idea. And it's really interesting to look at the 180s in these stocks that you're showing. Because it was overnight.

40:26Michael Batnick:It was overnight. All right. The next stock is doing a 180 the other way. What do we got? That's a segue to you, Josh. That was an alley-oop. You did that really well. Thank you.

40:40Downtown Josh Brown:We have to talk about this because it touches so many of the things that we talk about on the show all the time. There's a company that UWM, it's United Wholesale Mortgage. It surpassed Rocket to become the biggest supplier of mortgages in the United States. And they sort of built this. I want to be careful what I say here so we don't get sued, but also so I don't make a mistake. They sort of built this stranglehold on the independent mortgage broker industry where they became the provider of mortgages. Like, let's say you know a guy who's a mortgage broker and they don't work at a big bank. They own their own mortgage company.

41:21Downtown Josh Brown:Where do those people get their mortgages from? There's a few places. Rocket has a wholesale business, but really UWM became like the largest one. And so I know people who own mortgage companies, but they need to have the mortgages wholesaled to them in order for them to retail them to you, the home buyer. Okay, that's United Wholesale Mortgage. So this guy, Matt Ishbia, built it, and he is a Detroit native. He's in a blood feud with the Rocket founder, who is Dan Gilbert. It's crazy how much they have in common and how much they hate each other. They're both Jewish guys from Detroit in the mortgage business.

42:03Downtown Josh Brown:They both own NBA franchises. When Matt Ishbia went to buy the Phoenix Suns, I think this is true. Every single owner in the league voted yes. Dan Gilbert, who owns the Cavs, voted no. So there was like real hatred here. And maybe it was like business competition that crossed over and became personal. Whatever it is, Detroit ain't big enough for the both of them. Anyway, this thing came public in 2021 as a SPAC. I don't think it could have come public in any other era. It was one of those accidental IPOs that just sort of – the timing was right because we were in an everything bubble, a junk bubble we called it, whatever you want to say.

42:50Downtown Josh Brown:And I think the initial public offering was the biggest SPAC IPO ever. I think it was half the summer.

42:59Michael Batnick:It was$16 billion. $16?

43:01Downtown Josh Brown:Yeah. Okay. $16 billion never before happened. And it has been an absolute shit show for everyone except the insiders, including Ishbia, who's been able to sell billions of dollars worth of stock the entire way down over six years. Let's put up the chart. It's from Wall Street Journal who covered this story today.

43:24Michael Batnick:Gross.

43:24Downtown Josh Brown:I mean… This is just 26. So this is, I guess, they're showing the market cap? No, dude, there's just the share price. It's just 26. Right, if I showed you a share price chart that goes back to the beginning, it's so much worse. Right. Suffice to say. And it started dropping the day it de-spacked and became this. And I don't think it even had an up month at any point. Now, some of that is not the company's fault. The environment for housing has been horrible. Is this their fault? And mortgage rates never fell.

43:58Michael Batnick:They lost$600 million on an interest rate hedge. $600 million. All right.

44:06Downtown Josh Brown:This is the story of what's blown the company up. I guess they compete very close head-to-head with Rocket. Everything Rocket does, this company wants to do also. So Rocket did a deal to buy a giant mortgage servicing portfolio called Mr. Cooper. Mr.

44:25Michael Batnick:Cooper. Yeah.

44:26Downtown Josh Brown:Yes. And so it looks like United Wholesale was like, oh, no, no, no. Also, we're going to do that. And they tried to buy this thing called Two Harbors. And let me just quote this so I don't screw it up.

44:45Downtown Josh Brown:UWM took on a hedge that was betting mortgage rates would fall? Okay, fine. They took a$600 million loss. They took that hedge because they were trying to do this acquisition. How is that a hedge? How is that a hedge? All right, so listen. He had agreed in December to buy a real estate investment trust focused on mortgage servicing called Two Harbors. The$1.3 billion stock deal fell apart in March when two harbors spurned UWM and opted for a cash offer from another suitor. So the target pulled out. Mortgage companies often make hedges against their portfolios of mortgages, which change in value with interest rates.

45:27Downtown Josh Brown:However, UWM had paid to hedge a portfolio that the company never actually acquired, much to the confusion of some investors and analysts. They shouldn't have presumed, said one guy. Okay. Ishbia likely stuck with the pursuit of two harbors, quote, partly because he didn't want to lose. It's like a guy like that. It's like an athlete, like a mindset, like I won't lose. Okay. So now they're suing two harbors for breach of contract for$500 million. That'll play out. Ishbia has shown a willingness to spend his own money along with his brother who runs private equity firm. He bought the Suns in 2023.

46:05Downtown Josh Brown:He has pledged shares of UWM for personal loans, which he has previously said he barely used. He's like a big risk guy. My friend who's in the mortgage business.

46:16Michael Batnick:They bought the Suns in cash, so the franchise is not in danger of being taken away from him.

46:20Downtown Josh Brown:They bought the Suns in cash, but then he's pledging his shares for other things. I don't think the Suns is the problem here. The problem is they had to return to Oaktree for distressed financing. So we won't get into all the ins and outs of – but Oaktree is taking preferred stock with a 10 % cash dividend. They're putting somebody on the board. Well, here's the important part.

46:44Michael Batnick:Here's the important part. Isaiah Thomas, who nearly ruined my franchise, the Knicks, is a fucking board member of this company because Matt Ishpian was a fan of his growing up in Detroit. So Isaiah Thomas, see you. I'm guessing he's off the board. was your favorite part of

47:02Downtown Josh Brown:was your favorite part of the last dance Michael Jordan thing I when he was trashing Isaiah Thomas

47:08Michael Batnick:I met the criteria that's a great name I hate Isaiah Thomas so much

47:16Downtown Josh Brown:I have a few takeaways this was the biggest of the SPAC not the most well known the most well known is still the Chamath stuff Would you agree with that?

47:30Michael Batnick:Which is the most well-known SPAC? Was it Opendoor? Virgin.

47:34Downtown Josh Brown:Galactic. Virgin was a big one. Opendoor. And SoFi. Was DraftKings a SPAC? I don't think so. Maybe. SoFi is like sort of the last man standing. It's like one of the only post-SPACs that's got any kind of like standing or legitimacy somehow. Nothing to do with Chamath because he was gone relatively quickly. But this is like just another one. It's just unbelievable how horrible that crop of 2021 IPOs were. SPAC or no SPAC, just in every IPO. It's one after another. And I did want to -

48:10Michael Batnick:Airbnb, everything came to market.

48:20Downtown Josh Brown:John's got some images of this. They did a huge investigation of this company. I think it was the first one. This was April of 2024. So more than two years ago, if you were along the stock and you read this, you were out of this stock. Because they had, and this is way before this$600 billion loss. What these guys accurately captured was just like the culture and how crazy everything around this company was. like all these RICO lawsuits and racketeers, like schemes to defraud. And just there was so much smoke around this thing years ago. And the guys at Hunterbrook, like Sam Koppelman, they investigated it.

49:11Downtown Josh Brown:They wrote it up. They took a lot of shit for having done it. But they got you out of the stock. Credit to them. Credit to them. So, you know, we're not going to delve into the details here. It's not what we do on the show. But, wow, what a horrible ride it's been in this name. Okay, I think we're done there. Go ahead. We're going to make the case. We had to skip this last week, right?

49:38Michael Batnick:Or the week before? I can't remember.

49:40Downtown Josh Brown:When was the last time we did this?

49:43Michael Batnick:I made the case last week for Floor & Decor. Or two weeks ago? I don't know. Whatever.

49:47Downtown Josh Brown:All right. What are we doing today? Oh, all right. Let's do health in. I'm saying buy the dip. This is – I think it's still on best stocks in the market. I'll have to double check. But it is in our portfolio strategy that seeks to capture market leaders and momentum, which we call Porterhouse. And so full disclosure, we own this for ourselves and for clients through Porterhouse. Okay. And this is not a recommendation for anyone to buy or sell. etc. Our whole disclaimer is linked in the show notes. We've been talking about travel for a long time. As I mentioned earlier in the show, it is the best slice of the consumer situation right now.

50:33Downtown Josh Brown:Hilton is interesting because it's part of a trio of names that's been on the best stocks list. Marriott's on there, which I also own. I bought that recently. I bought the dip in Marriott. It's working. I think Hilton's the next one to bounce. This company's been around for 100 years. 1919. Do you know that? Founded by Conrad Hilton, who is the great-grandfather of Paris Hilton. They don't own anything. This is a marketing and points business, just like Marriott. 85 % of the hotels are owned by franchises or developers. They keep a few hotels that they use to test new concepts in and just to like kind of keep their hand in it.

51:21Downtown Josh Brown:But the way to think about this business is they run commercials, they manage the points, the loyalty programs, et cetera, and they pick locations and they design things, but they don't sit with the real estate. That's somebody else's problem. It's a great, great business. Their sub-brands are like Waldorf Astoria, the Conrad Hotels, they own LXR, Nomad, Signia, Canopy, the Curio Collection, Graduate, which is where you stay when you visit your kid in college, I learned recently, Double Trees, Hilton Gardens. They have all these sub-brands, but basically think about this like a marketing company that deals in the travel space.

52:06Downtown Josh Brown:compounding at 22 % over 10 years. Wow. Annual compounding, which is really high. First came public in 1946, taken private in 07, during the real estate bubble, came back in 2013 as a transformed company. Here's a picture of what it looked like when they came public again. You see they're all in the robes. That was clever. I don't know if Paris Hilton was there. I would imagine they probably weren't interested in going there. Anyway, travel stocks have been incredible. This stock is right now in a dip, but the fundamentals are unbelievable, and I think it will join Marriott and Expedia and Delta in finding buyers right here at this critical level.

52:53Downtown Josh Brown:Put it back up. Here's a one-year technical chart. This is it. I think 315, you've got this rising 200-day. It's falling right into that level. This is exactly what Marriott looked like when we talked about it the other day. 307.68 is the 200-day. I would just say 305. I would watch it on a closing weekly basis on Friday. if this thing finishes the week below 305, I'm wrong. There's nothing here. Get the hell out. If it bounces from these levels, I don't see why it couldn't get back to those old highs. Let me show you a five-year. The bigger picture is the stock is going up. So that's my make the case.

53:39Downtown Josh Brown:As far as fundamentals, you could look up the last earnings report yourself. It was unbelievable. They have 9 ,453 properties. 1.4 million rooms, 144 countries. Hilton Honors membership is up 15 % year over year. They have 260 million Hilton Honors members all over the world. Revenue was up. Earnings were up. Revpar, which is revenue per available room, was healthy. They're building. They're growing. And travel is not going to all of a sudden fall apart. Can I tell you something? I know people have been predicting that.

54:17Michael Batnick:So we went to book a vacation for December and I looked at a couple of islands and I couldn't get in. Like for December.

54:27Downtown Josh Brown:Yeah, too late. You missed the boat.

54:28Michael Batnick:December. I know. It's unbelievable. I know. Travel is so strong.

54:33Downtown Josh Brown:They cannot build in the right locations. They cannot build festivals. Anyway, that's my make the case. I like it. Put the one-year chart one more time. Would you buy this dip? Yeah. Will you buy this dip? I mean I own the stock. Will you accept this, Rose? Well, I know you own the stock through Porterhouse, but would you overload?

54:52Michael Batnick:No, I'm not going to do that. You don't have that feeling that I'm going to be right here? I don't want to mess with – I don't want to, like, overlap and I don't want to be buying and selling stocks we own. You know, I don't want to do that.

55:02Downtown Josh Brown:Fair enough.

55:03Michael Batnick:But I like it. Okay. I've got to mess through a chart. And this is a sub-industry group, I suppose, whatever. I think that's the right way to describe it. Chart on, please. This is an ETF. and that July low was the definition of a tradable bottom. Did not undercut the previous low. I mean, that was a tradable bottom if there ever was one and of course I didn't trade it.

55:27Downtown Josh Brown:Sub-industry group. What else are you getting me?

55:30Michael Batnick:So it got caught up in the AI is going to kill everything and that's the only clue I'm going to give you and it got hit pretty damn good. I mean, look at that. Look at that decline. And we spoke a lot about this.

55:43Downtown Josh Brown:All right. Give me three guesses. Go ahead. Okay. I think you're only going to need two. Broker dealers?

55:52Michael Batnick:No, you're on the right track.

55:54Downtown Josh Brown:I'm on the right track.

55:56Michael Batnick:You're in the right sector. That's your last hit.

56:00Downtown Josh Brown:I'm in the right sector. So it's finance? It's not the broker dealers.

56:04Michael Batnick:This actually is finance. It's in finance?

56:08Downtown Josh Brown:Oh, private equity? Yeah. I got it? Oh, look at me. Alternative Asset Managers ETF. Pretty good, right? Pretty good. That's interesting. That's a low. That's more than a tradable low. That might be the low.

56:26Michael Batnick:I was right but wrong. I thought that this was going to blow over all the smoke, and I bought it and I sold it at the low. So credit to me.

56:32Downtown Josh Brown:I want to say this. I was very open to the idea. You were bearish. I was. I was very open to the idea that there were going to be a lot of blowups in private credit specifically, more so than private equity, but not on necessarily a data center basis. I just thought generally there's way too much activity in that arena for there not to be some problems. There will be. Well, there are. There will be. I told you yesterday about a restaurant chain that filed Chapter 11. Believe you me, there's private credit money in that chain. Who did I tell you it was? Brooklyn Diner? I can't remember. Whatever the hell it is.

57:16Downtown Josh Brown:It's just that it's not proving to be systemic. And it won't prove to be systemic until a major privately held software business literally runs out of money. Does that seem to be imminent right now? Does that appear to be the case? Or a data center? People say there's no demand anymore for data. It doesn't feel imminent in any way, shape, or form. What are you looking at? But didn't Vista have a big blowup?

57:53Michael Batnick:Auto parts. It was auto parts.

57:58Downtown Josh Brown:We haven't seen like...

58:00Michael Batnick:I think there was something else. I think there was something else.

58:01Downtown Josh Brown:We haven't seen like reorgs where people are like, oh, it was a SaaS business that went under. No, there was one.

58:08Michael Batnick:There was a big one. Whatever. We haven't seen anything since. And I'm very shocked because the journalists are dying for more.

58:16Downtown Josh Brown:They want it so bad they could taste it.

58:18Michael Batnick:So as soon as it happens.

58:19Downtown Josh Brown:And the amateur journalists, look, there are people that are still very much on this beat. And I'm not willing to say it's not going to happen and that they're definitely wrong. The equity market thinks they're wrong Right now, that's number one And number two, it is not on the front page It's not even on the tenth page So whatever is going on The market has decided We do not care about that story anymore We're not reacting to it And it could change It could change But it's just I'm not going to spend time on it Thinking about it, reading about it Because I'm not seeing any evidence than anybody else's either.

59:00Downtown Josh Brown:And that's just the way I roll. All right. What a show. I think we did a lot, right? Yeah, we did it all. All right. Hey, guys, let me let you know about a couple things. Number one, thank you so much for those of you who joined us for the live. We really appreciate it. Number two, tomorrow is Wednesday, which means you're getting a brand new episode of Animal Spirits with Michael and Ben. Always great. Ben and Duncan will then return with a live show that we do just like this one where they are taking audience questions. But if you want your question answered on the show, and it could be a question about finance, economics, personal finance, paying bills, investing, whatever, you want to send an email to askthecompoundshow at gmail.com.

59:52Downtown Josh Brown:They have gotten thousands of questions over the years. and if they use your question on the show, they're going to send you some Compound swag. So that's Duncan and Ben, Ask the Compound. Make sure to check that out. Michael and I will be back at the end of the week with the Compound and Friends. We're going to have a lot of fun this week. We've been having unbelievable guests all summer and we really appreciate how much love that you guys are showing the show. If you haven't yet hit the like button right here, right now and you're watching us live, go ahead and do that. All right, that's all we have to say.

1:00:26Downtown Josh Brown:Thank you so much for joining us. We'll see you soon.

1:00:55Thank you.